What happens when a bond reaches maturity?

When a bond reaches its maturity date, several things can happen depending on the terms of the bond and the issuer's obligations. Here are the possible scenarios:

1. Principal Repayment: Upon maturity, the issuer of the bond is typically obligated to repay the bondholder the full face value or principal amount of the bond. This means the bondholder receives the initial investment back.

2. Final Interest Payment: In addition to the principal repayment, the issuer may also make a final interest payment to the bondholder. Bonds generally pay periodic interest payments over their term, and the final interest payment is made along with the principal repayment at maturity.

3. Redemption Options: Some bonds may have optional redemption provisions that allow the issuer to redeem the bond before its maturity date. In such cases, the issuer may choose to exercise the redemption option and repay the bondholder before the stated maturity date.

4. Extension or Renewal: In certain cases, the issuer may have the option to extend the maturity date of the bond. This can happen if the bond contains provisions for extension or if the issuer chooses to refinance the bond by issuing a new bond to repay the existing one.

It's important for bondholders to review the terms and conditions of the bond to understand what will happen at maturity. Different bonds may have varying provisions, and the specific actions taken by the issuer will depend on the terms agreed upon at the time of issuance.